It’s no secret that medical school is expensive. According to the Association of American Medical Colleges, the average medical school debt for students who graduated in 2019 was $201,490.
If you’re considering medical school or you’re already in the thick of it, it’s important to understand what to expect from the financing process and what your options are for debt repayment and reduction.
What is the average medical school debt?
The average student loan debt for doctors and other medical school graduates sits at $201,490, a 3 percent increase from the previous year. That’s a far cry from $28,950, the average student loan debt for all graduating college students during the same year, according to the Institute of College Access and Success.
Here are some more details about the average debt after medical school:
Seventy-three percent of graduates have med school debt.
Almost one in five medical school graduates have more than $300,000 in student loan debt.
The median pre-med school debt is $25,000.
Forty-four percent of medical school graduates plan to enter a student loan forgiveness or repayment program.
Medical school graduates also have other debts, including a median of $5,000 on credit cards and a median of $10,000 in residency and relocation loans.
In comparison, the average student loan balance for graduates with professional doctorate degrees for the 2015-16 school year (the latest data available) was $186,600, according to the National Center for Education Statistics. Graduates with research doctorate degrees and master’s degrees finished school with $108,400 and $66,000 in debt, respectively.
What are the average interest rates on medical school loans?
If you have federal student loans, including undergraduate and graduate loans, interest rates are updated every year. Private student loans, on the other hand, typically offer a range of interest rates, which are dependent on the borrower’s creditworthiness.
Here’s a history of federal student loan interest rates from the last several years:
School Year Direct Loans for Undergraduate Students Direct Loans for Graduate and Professional Students Direct PLUS Loans for Parents and Graduate and Professional Students
2020-21 2.75% 4.3% 5.3%
2019-20 4.53% 6.08% 7.08%
2018-19 5.05% 6.6% 7.6%
2017-18 4.45% 6% 7%
2016-17 3.76% 5.31% 6.31%
2015-16 4.29% 5.84% 6.84%
As of November 2020, private student loan interest rates range from just under 2 percent to roughly 14 percent, depending on the lender and your creditworthiness.
It’s important to understand that most student loans accrue interest while you’re in school even if you elect not to make payments, and if you choose to continue that deferral through residency, the interest will compound. Once you’re ready to make payments, the lender will capitalize the interest, adding it to your principal balance and increasing your monthly payment.
How long does it take to repay medical school loans?
The standard repayment term for federal student loans is 10 years. If you’re having a hard time keeping up with your monthly payments, though, you can extend your repayment schedule to up to 30 years with alternative repayment plans:
Repayment Plan Repayment Term
Consolidation Loan Up to 30 years
Extended 25 years
Pay as You Earn 20 years
Revised Pay as You Earn Up to 25 years
Income-Based Up to 25 years
Income-Contingent Up to 25 years
Private student loan companies set their own repayment terms, but most private medical school loans will allow to choose terms from five to 20 years. Of course, you can always refinance your loans to new terms as well, extending the payoff period. How long it takes you to repay your med school debt ultimately depends on your salary and other expenses.
How do I reduce my medical school debt?
You may find it difficult to work even a part-time job while you’re in medical school, so you may need to rely on scholarships and grants to reduce your reliance on debt to get you through college.
However, once you finish school, you’ll have a few different options to reduce your student loan balance, or at least the amount of interest you pay on the debt.
Student loan forgiveness programs
The federal government offers student loan forgiveness to borrowers who work for a government agency or eligible not-for-profit organization. To qualify for the Public Service Loan Forgiveness program, you’ll need to work full time for an eligible employer while making 120 qualifying monthly payments.
Once you’ve completed all of the requirements, your remaining debt will be forgiven with no tax consequences.
You can also achieve forgiveness by getting on an income-driven repayment plan and completing the repayment term. After 25 years of payments, your remaining debt will be forgiven, although the discharged balance is considered taxable income.
Student loan repayment assistance programs
Federal agencies and state governments offer a variety of student loan repayment assistance programs. These programs aren’t technically forgiveness programs, because the benefit doesn’t come from the lender, which is the U.S. Department of Education.
However, depending on the program, you could get tens of thousands of dollars in repayment assistance. The Association of American Medical Colleges maintains a list of state and federal programs you may be able to take advantage of.
One thing to keep in mind is that these programs typically only provide assistance to borrowers with federal loans. If you have private student loans, they may not be eligible.
Student loan refinancing
Student loan refinancing is the process of replacing one or more existing loans with a new one through a private lender. Depending on your income and credit history, you may qualify for student loan refinance rates that are lower than what you’re currently paying, which can save you money and reduce your monthly payment.
You’ll also have the opportunity to shorten or extend your loan repayment term — lenders typically offer terms ranging from five to 25 years.
Note, however, that if you have federal loans, refinancing may not be the best option if you’re working toward forgiveness, a repayment assistance program or an income-driven repayment plan.
Whatever you do, it’s important to be proactive about paying off your med school debt. Research your options, especially forgiveness and repayment assistance programs, and choose the one that best suits your needs and financial goals.
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